Web 3.0 at Miami Art Week

The first week of December I went to Miami Art Week (Art Basel), the for-profit, privately owned and managed international art fair. Although art received the spotlight that week, the event attracted several technology and financial companies looking to expand their network and make or receive investments.

I spent 100% of my time at events for venture capitalists, bankers/financiers, startups, and individuals working in technology. The conversations I had in these areas gave me a better idea of ​​the current sentiment around digital assets, given the ongoing bear market. Here’s what I learned.

No one says blockchain anymore

The very first thing I noticed is that no one refers to blockchain or digital asset projects as “blockchain-based projects”, “a project that uses cryptocurrency” or “a project that uses digital assets”. Instead, everyone throws such projects under the broad umbrella of web3.

Although web3 started as a way to describe private ownership of content and property that could be distributed and consumed directly peer-to-peer, it has now become the new way of saying, “This project uses a blockchain or a digital resource.” It’s no secret that web3 is one of the latest buzzwords to be used in blockchain and digital assets, yet it was a surprise that people go out of their way to avoid saying the word blockchain or ‘cryptocurrency’ these days. I think they do this for two reasons:

• The events that have taken place in the digital asset industry in the last six months have given words like “blockchain”, “bitcoin”, “Ethereum”, “crypto”, etc. a negative connotation, while web3 is so broad and vague. that it narrowly avoids being lumped in with the words that have been used to describe blockchain-based projects over the past eight years.
• I think newcomers, people who started participating in blockchain and digital assets around 2020 and beyond, really know the area referred to as web3 since they joined at a time when the buzzwords of the past were starting to phase out of conversation.

This brings me to my next observation…everyone I spoke to who got into blockchain and digital assets in the “web3 era” is significantly under water on their investments.

Retail investors are devastated

Most web3-era retail investors I spoke to said they were down about 85% on their original investment. In retrospect, it is clear why this is so. The Web3 era of blockchain enthusiasts and investors made their first investments just before the bear market began.

Unfortunately, the poor timing of their investments has deeply scarred them and played a major role in shaping their overall perception of the blockchain and digital asset space. Most of the people in this category I spoke to admitted to having invested out of FOMO and expressed that the bags they are left with have no useful value apart from price speculation.

As a result, many of these web3-era retail investors will stay away from the blockchain and digital asset industry for some time now. If a new trend emerges and takes off, the web3 era of retail investors will be skeptical and remember their personal experience of entering a promising trend, only to lose 85% of their money. I think the group that has been deeply scarred will only return to the blockchain and digital asset space when everyone around them is making money except them and FOMO kicks in again.

Accredited investors and institutions continue to invest

Despite retail investors being financially devastated and hesitant to return to the digital asset markets, accredited investors and institutions told me that they continue to make investments in the space, but at a different pace than they invested before. One hedge fund I spoke to even said they are more profitable now than before the bear market because there are more arbitrage opportunities available now that one of the biggest market players, Alameda Research, has been put out of business.

Some of the investors I spoke to are still looking for companies that use coins or tokens. Others actively moved away from models that use coins or tokens and sought out/invested in “infrastructure plays,” companies that created solutions that use blockchain protocols, but not coins and tokens. It is important to note that the investors looking for coins and tokens were the vocal minority. Most of the venture capital firms and entities that invest as an institution are more interested in investing in a company in exchange for equity capital.

Despite persistent optimism, everyone investors expressed that they scrutinize the potential deals that cross their desks to a greater degree and devote more time and energy to the due diligence process than before the bear market began.

in summary

The sentiment around businesses using a blockchain is generally negative when you talk to retail investors, and the sentiment is neutral when you talk about “smart money”. Retail investors talk bad about blockchain projects and are skeptical about the future because most of them invested in vaporware at unfavorable times and are now down about 85% of their original investment.

I believe that smart money is neutral because some people are not ready to accept the fact that they have made a bad investment in a company that uses a blockchain for an illegal purpose, so the investor uses their capital to defend the bad investment. But I recognize that others in the “smart money” crowd are optimistic for two reasons: (1) they truly believe that a blockchain can be used somewhere in a company’s technology stack to increase operational efficiency and reduce costs, (2) and they know it are some good deals in the market at the moment as the bear market has forced both companies and investors to reassess valuations.

Unfortunately, these two groups – retail investors/consumers and accredited investors/blockchain companies – do not have clear lines of communication with each other. So the companies that is jobs with legitimate enterprises tend to fly under the radar, while retail investors and consumers who made bad investment decisions continue to believe and spread the word to their network that they got burned on a web3 project and that most coins and tokens create no real value in the world.

Until a company or individual builds a product or service that consumers want and demand that uses blockchain somewhere in the technology stack, the negative sentiment surrounding the blockchain and digital asset space will continue. Consumers and retail investors are the vocal majority in this situation, and at the moment they don’t have many – if any – good things to say about blockchain because they’ve been burned by coins and tokens that live on the chain.

The good news is that companies and independent developers are building sought-after apps and services, especially in the enterprise arena. The bad news is that enterprise solutions usually don’t have the same socially driven network effect that leads to a change in market sentiment.

No one I spoke to put a figure on how long it will take for things to turn around; Regardless, all the conversations I had indicated that people continue to observe the blockchain and digital asset space, regardless of whether they plan to become a market participant again.

See: BSV Global Blockchain Convention panel, The core of Web3 is data ownership

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